Desire2Learn raises $80M in first round of outside funding

Kitchener-based Desire2Learn raises $80M in outside funding

John Baker started his business in 1999, when he was in his third year of university. He has since grown Desire2Learn Inc. into a global provider of online education platforms with more than 560 employees, all without any outside funding — until now.

On Tuesday, Kitchener, Ont.-based Desire2Learn announced a massive venture capital investment of $80-million, in a funding round backed by OMERS Ventures and U.S. venture fund New Enterprise Associates.

Mr. Baker said in an interview that he felt more comfortable bootstrapping his business over the years because he “wanted to build an enduring company.”

But, he said, the capital injection should accelerate the growth of his already profitable venture and make it easier to attract top talent (he’s looking to add another 170 employees to his team).

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“Why now is really based on the fact that we’re seeing a lot of transformation happening in the education space,” Mr. Baker said. “I personally have never seen more demand for higher education or education in general.”

In the last year or so, interest in so-called “massive open online courses” has taken off, with millions of users signing up to take free classes from top-name educational institutions in partnership with startups like Coursera, Udacity and edX.

Mr. Baker said that is just one element of what’s happening with online learning.

“I think what’s more telling is the fact that more of the traditional online courses being provided by the University of Guelph or Waterloo are growing in some cases 40%, 50% year over year.”

Desire2Learn said it has 700 clients, with about 80% of its business coming from the United States, and will use the funding to help boost its customer service and cloud infrastructure as it continues to push into global markets.

For his part, Howard Gwin, managing director of OMERS Ventures, the venture capital arm of the Ontario Municipal Employees Retirement System, said Desire2Learn is “one of those rare companies that can really make a global impact,” and can scale past even $1-billion in revenues — something that’s even more unusual to find in a business that has been bootstrapped to this point.

“The firm’s been courted by everyone because of its size. We looked at it and said, ‘This could be one of those half-dozen Canadian companies today that could be the next Cognos, which creates kind of a global impact,'” he said.

The amount of OMERS Ventures’ and NEA’s respective investments was not disclosed, but Mr. Gwin said, “it’s a substantial dollar figure from both firms.”

He and the investment team at OMERS Ventures have made several high-profile, large investments since the $180-million fund was launched last October.

All three are Vancouver-based companies with enterprise software solutions, something Mr. Gwin and Derek Smyth, also managing director at OMERS Ventures, have a background in.

“We’re trying to identify the few companies — it’s not hundreds — that with a significant amount of dollars in treasury, will be able to scale in an aggressive fashion, and that’s the case with Vision Critical, Build Direct and Desire2Learn, where the cheque size is significant,” Mr. Gwin said.

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